After the first few hours of global trading this morning, we observed the 10yr yields trading in the low 1.7's and noted that it was a lot of market movement for what was essentially an as-expected, "back-patting get-together" producing no concrete results other than "good intentions," and that "it's not uncommon for trading levels during the Asian hours to be significantly weaker for bond markets only for domestic investors to reign things back in." As it turned out, we may have under-emphasized both those points. Treasuries paused for just a bit of reflection this morning after already having gained back a significant portion of their losses, and then improved decisively into mid-day where they mostly abandoned the higher volume directionality of the morning, instead chopping around in an increasingly narrow range, about 3bps lower than Friday's latest levels. MBS were largely "along for the ride," as origination volumes were understandably low on this Class A Notification Day (Fannie and Freddie 30yr Fixed MBS "roll" tonight, so look for roughly 8 ticks to disappear as we shift to viewing July coupons tomorrow).
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 4:09 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Sideways Themes Breaking Down. MBS Hitting New Highs
Given the lack of fundamental causality, there's no telling how long this will continue to be the case, but Fannie 3.0s and 3.5s just hit new highs on the day as 10yr yields and stocks hit session lows. This is a bit of a departure from the previous state of affairs that had all of the above markets drifting sideways after some morning volatility.
Fannie 3.5's are up 6 ticks on the day at 105-04 and 3.0's are up 7 ticks at 102-18. We've seen one positive reprice so far, and while it's possible others will follow, that becomes more likely if recent gains are held for a bit longer, or improved upon.
Volume Wanes, Rally Stalls. MBS Still Green, But Off Their Highs
There were three distinct waves of volume in Treasury futures this morning. The first brought minor weakness as the domestic session got underway resulting in a test of high yields at 1.6557.
The second wave arrived in concert with the 9:30am stock market open. Stock futures had already fallen plenty from the loftier midnight levels (mid 1340's to mid 1330's), but at least another 10 point slide began at the 9:30am open, helping 10yr yields fall further, and MBS prices break into the green.
The third wave looks to be have been an expedition to determine support levels for stocks and resistance levels for bonds. It began with another mini volume surge and more "risk-off" movements (10yr yields and stock prices lower, MBS prices higher), but put in a distinct bounce at 1.591 in 10yr yields and 105-03 in Fannie 3.5's. The S&P experienced it at 1320 (after opening at 1335).
Everything since then has just been casually drifting back in the other direction, looking anything but frantic or volatile at the moment. In fact, the extent to which the movement has been "in the other direction" is already looking questionable. We'd probably lean toward classifying the current price action as "sideways, just slightly off highs."
EU floats worst-case plans for Greek euro exit: sources
(Reuters) - European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro.
EU officials have told Reuters the ideas are part of a range of contingency plans. They emphasized that the discussions were merely about being prepared for any eventuality rather than planning for something they expect to happen - no one Reuters has spoken to expects Greece to leave the single currency area.
Belgium's finance minister, Steve Vanackere, said at the end of May that it was a basic function of each euro zone member state to be prepared for problems. These discussions appear to be in that vein.
But with increased political uncertainty in Greece following the inconclusive election on May 6 and ahead of a second election on June 17, there is now an increased need to have contingencies in place, the EU sources said.
Live Chat Featured Comments
Adam Quinones : "other than rolls it was kinda quiet...as MG pointed out earlier."
Adam Quinones : "5.0 roll got destroyed"
Christopher Stevens : "interesting day in teh MBS"
Michael Tadros : "REPRICE: 3:36 PM - Suntrust Better"
Michael Tadros : "REPRICE: 3:22 PM - Flagstar Better"
Jeff Anderson : "REPRICE: 3:21 PM - Chase Better"
Chris Kopec : "REPRICE: 3:21 PM - GMAC Better"
Thomas Nelson : "REPRICE: 3:12 PM - NYCB Better"
Jeff Statz : "page 4 of ML 12-4 covers it. not sure if you need more than that..."
Andy Pada : "yes"
Jeff Statz : "you mean the eligibility criteria?"
Andy Pada : "can anyone provide a link for the guidelines for the post June 11, FHA streamline refinances?"
Michael Brasher : "Josh - here is a link to the excel spread sheet USDA released October 1st 2011 with the change the fee schedule. Go half way down the page to loan originator right hand column to Guarantee Fee & annual Calculator https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do "
Michael Tadros : "REPRICE: 1:51 PM - Provident Funding Better"
Michael Brasher : "Josh- that usda calculation is ok for a general quote but it is not exact. i am searching for a spreadsheet they sent out last October to send to you."
Matthew Graham : "For the record, at least as far as he said last Thursday, it won't be the Greek elections taking place 3 days before the FOMC Announcement that would do the 'convincing,' as he'd previously said he 'wouldn't make a direct line connection between the greek elections and fed monetary policy." "
Matthew Graham : "no major departures from his recent (1-2 month window) stance. "
Matthew Graham : "RTRS - LOCKHART: I DON'T HAVE HIGHLY CERTAIN VIEW WHETHER CURRENT LABOR MARKET IS A LULL OR SOMETHING MORE PERMANENT "
Matthew Graham : "RTRS- LOCKHART SAYS NOT CONVINCED THAT CIRCUMSTANCES 'QUITE YET' CALL FOR ANY ADDITIONAL ACTION "
Matthew Graham : "RTRS- FED'S LOCKHART SAYS NO POLICY OPTIONS SHOULD BE TAKEN OFF TABLE UNDER CURRENT CIRCUMSTANCES "
Jason Adams : "John that is what i got. we sell to Chase for USDA "
Jason Adams : "Purchases - One-time guarantee fee of 2.00% & 0.3% Annual Fee
Refinances- One-time guarantee fee of 1.50% & 0.3% Annual Fee"
Josh Stika : "anyone know where I can find USDA funding fee guidelines?"
Victor Burek : "REPRICE: 1:00 PM - Nexbank Better"
Alan Craft : "Flagstar, GMAC, US Bank are who we use."
Eric McDonald : "Who are the best jumbo lenders? I haven't done one since the market crashed. I deal with Wells and Provident and didn't know what else is out there."
Eric Franson : "REPRICE: 12:04 PM - Wells Fargo Better"
Matthew Graham : "lol, thanks for answering before I asked. very punctual"
Matthew Graham : "wouldn't you?"
Victor Burek : "i would"
Matthew Graham : "yeah, talking about limiting it in the future potentially is only going to make people go grab it today."
Victor Burek : "why would anyone leave money in a bank over there"
Brent Borcherding : "That sound kind of scary...locking down travel?"
Matthew Graham : "As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.
"Contingency planning is underway for a scenario under which Greece leaves," one of the sources, who has been involved in the conference calls, said. "Limited cash withdrawals from ATMs and limited movement of capital have been considered and analysed.""
Brent Borcherding : ""limiting ATM withdrawals"???? "
Matthew Graham : "RTRS - IMPOSING BORDER CHECKS, LIMITING ATM WITHDRAWALS ALSO PART OF WORST-CASE SCENARIO PLANNING - EU SOURCES "
Matthew Graham : "RTRS- EURO ZONE FINANCE OFFICIALS HAVE DISCUSSED IMPOSING CAPITAL CONTROLS AS PART OF WORST-CASE PLANS IF GREECE LEAVES EURO ZONE - EU SOURCES "
Matthew Graham : "RTRS - USE OF ESM PREFERRED CREDITOR STATUS NOT ENOUGH TO TRIGGER CREDIT EVENT, IF ESM FUNDS SPANISH BANK BAILOUT -ECB'S COENE "
Matthew Graham : "RTRS - NO LINK BETWEEN SPANISH BANKING BAILOUT AND POSSIBLE REVIVAL OF ECB'S BOND BUYING -ECB'S COENE "